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Year-to-date (as of the end of February) there have been sales of 2,230 units, up a considerable 28 per cent compared to the same period last year, and up 17 per cent on the 10-year average, continuing a rally that started in autumn, 2013.

Prices have remained relatively flat, helping to maintain affordability in the condo market. The RealNet Highrise Price Index ended the month of February at $438,556, up only 1.5 per cent from the previous year.

There are a few key things, however, that need to be understood about the housing market — particularly when it comes to prices of new highrise units.

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The general costs to build new housing are going up.

Land costs are also increasing, as most new condominiums involve the redevelopment of existing commercial real estate properties, and those properties are trading at record-high prices.

Development charges are also contributing toward increased construction costs, and they are predicted to rise by approximately $10 per square foot over the next three years.

Rising input costs like these have pushed the unit price of a new highrise condo to a record-high $559 per square foot, across the GTA.

How do builders maintain affordability in the face of these rising development costs? The secret is to find efficiencies.

Starting in 2009 — when the HST was introduced in Ontario — we began to see a shrinking trend in the average size of a new condominium in the GTA.

In order to manage the rising costs that came as a result of tacking HST onto the price of a new home, architects, engineers and developers had to innovate and come up with unit designs that would make the most of less space — in other words, they started designing units to be more efficient.

Between 2009 and 2012, the size of a new condo in the GTA was reduced by approximately 120 square feet — that’s the equivalent of removing a 10-foot by 12-foot room from the condo as it existed in 2009.

RealNet’s February market numbers offer evidence of this trend continuing. While the index price of new condominiums remained relatively flat, the index price per square foot grew to a record-high $559 per square foot, while the index size of units decreased to a record-low 784 square feet.

The GTA is expected to grow by an additional 2.4 million people by 2036, a population roughly the size of Vancouver. All those people will have to live somewhere.

And Ontario’s pro-intensification policies are determining how this will all play out, as the province continues to push for urban regions like the GTA to become more dense.

With most builders given little choice but to build up, not out — and with multi-family dwellings replacing single-family homes as the predominant form of housing in the region — the way we live is being fundamentally re-shaped.

George Carras is the president of RealNet Canada Inc. His column appears in New in Homes & Condos the last Saturday of every month. For more information, visit realnet.ca or follow on Twitter at @realnet_canada.

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